EDF gets Constellation nuke stake nibbles-source

Published August 1, 2011

Reuters

By Michael Erman

NEW YORK (Reuters) - EDF has been
approached by third parties interested in its stake in
Constellation Energy Group Inc's nuclear plants, as the
French power company's dispute with its U.S. partner has heated
up, according to a source familiar with the matter.

EDF also is considering replacing its representative on the
Constellation board, Daniel Camus, as it works to pressure
Constellation against using its option to sell up to $2 billion
of non-nuclear assets to EDF.

That option is at the center of EDF's dispute with
Constellation. The U.S. power company received it as part of
its 2008 agreement to sell 49.9 percent of its operating
nuclear plants to EDF.

"EDF is currently reviewing its position on the board of
Constellation," an EDF spokeswoman said Friday. The company
is actively talking to candidates for the spot outside of EDF,
including utility executives and corporate lawyers, according
to the source.

Reuters reported earlier this week that EDF was considering
a range of options for its U.S. operations as the dispute went
on, including litigation and selling the stake in
Constellation's operating nuclear plants.

The source declined to name the companies that have
expressed interest in the stake but said EDF has a strong
interest in exiting the business.

Under the terms of the original deal, Constellation has the
right to make a first offer on the nuclear assets, but does not
have total preemption rights.

EDF is still committed to developing nuclear generation in
the United States but could also dissolve UniStar, the
partnership it formed with Constellation to develop new nuclear
plants there, sources have told Reuters.

EDF and Constellation are in the midst of talks over the
put option, which is set to expire at year-end, according to
several sources familiar with the matter.

Constellation was facing a liquidity crisis when it agreed
to the deal with EDF. Constellation Chief Executive Officer
Mayo Shattuck said then that he regarded the option to sell the
assets "primarily as a backstop liquidity facility."

He also said the company "would not have the intent at this
point to put the assets to EDF."

But the market value of gas and coal-fired power assets has
declined markedly since 2008, and Constellation has
acknowledged that exercising the option could be a profitable
move.

EDF CEO Henri Proglio was appointed in late 2009, after the
deal with Constellation was already in motion.

Proglio is working to cut billions of the company's debt
and has said he does not believe holding a minority stake in a
U.S.-based company like Constellation is in EDF's best
interests.

Given the chance, he would gladly get out of the deal,
bankers say. Analysts have said it is in his best interest to
resolve the dispute soon, as EDF shifts focus from a utility
company to an end-to-end nuclear services provider on a global
scale.

French President Nicolas Sarkozy is looking to unite
France's nuclear industry behind an effort to win contracts
building new nuclear reactors abroad. Proglio, who is seen as
close to the president, will likely spearhead the effort.

EDF is roughly 85 percent-owned by the French state.

A Constellation spokesman declined to comment.
(Reporting by Michael Erman; Additional reporting by James
Regan in Paris; Editing by Gerald E. McCormick and Carol
Bishopric)